The G7 accepts a fixed price for Russian oil.
Moscow’s power to control the world’s oil market is to be curtailed by the decision.
WASHINGTON/LONDON:
The Group of Seven wealthy nations and Australia have decided against adopting a variable rate when they finalize a price restriction on Russian oil later this month, sources said on Thursday.
A price cap on seaborne oil shipments, which is to go into effect on December 5, has been the subject of heated negotiations between US officials and the G7 countries in recent weeks. The goal is to prevent the global oil market from being slowed down by EU and US sanctions aimed at limiting Moscow’s ability to finance its invasion of Ukraine.
A coalition source who was not authorized to speak in public said, “The coalition has agreed the price cap will be a fixed price that will be evaluated on a regular basis rather than a discount to an index.” To alleviate the burden on market players, this will promote market stability and simplify compliance.
Although the initial price hasn’t been decided upon, numerous reports indicated that it will be in the upcoming weeks. Without going into greater detail, the source stated that the coalition partners had agreed to assess the set pricing on a regular basis and make adjustments as necessary.
According to the insider, there would have been too much volatility and probable price fluctuations if the price had been set as a discount to some index.
According to a second source with knowledge of the conversations, the coalition was concerned that a floating price set below the Brent international benchmark might allow Russian President Vladimir Putin to manipulate the system by decreasing supplies.
Putin might benefit from a floating price system because, if Brent rose as a result of a reduction in oil from Russia, one of the world’s greatest producers, the price for oil in his nation would also rise. The coalition and bureaucracy will need to meet more frequently to assess the agreed fixed price structure, according to the source.
